LOAN MODIFICATION, CONSENT AND FORBEARANCE AGREEMENT
This Loan Modification, Consent and Forbearance Agreement is entered into
as of August 20, 1998, by and among Versatility, Inc. and Versatility (UK) Ltd.
(collectively, "Borrower"), Oracle Corporation, a Delaware Corporation
("Acquiror"), and Silicon Valley Bank ("Bank") a California-chartered bank doing
business under the name "Silicon Valley East".
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other
documents, a Loan and Security Agreement, dated October 29, 1997, as may be
amended from time to time, (the "Loan Agreement"). The Loan Agreement provided
for, among other things, a Committed Revolving Line in the original principal
amount of Five Million Dollars ($5,000,000) (the "Revolving Facility"). The Loan
Agreement has been modified pursuant to, among other documents, a Loan
Modification Agreement dated April 28, 1998, and effective as of April 30, 1998
(the "April 1998 Loan Modification Agreement"), pursuant to which, among other
things, no further Advances were allowed under the Committed Revolving Line.
Furthermore, pursuant to, among other documents, the April 1998 Loan
Modification Agreement, Bank agreed to, among other things, waive and forbear
from exercising its remedies available to it as a result of Borrower's defaults
under the Loan Agreement prior to April 30, 1998 and to forbear from exercising
its remedies available to it as a result of Borrower's defaults of Sections 6.7
and 6.8 under the Loan Agreement, after April 30, 1998.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF EXISTING COLLATERAL AND GUARANTIES. Repayment of the
Indebtedness is secured by the Collateral as described in the Loan Agreement and
by the Intellectual Property Collateral as described in that certain
Intellectual Property Security Agreement dated April 30, 1998, by and between
Versatility, Inc. and Borrower.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing payment of the Indebtedness shall be referred
to as the "Security Documents." Hereinafter, the Security Documents, together
with all other documents evidencing securing or pertaining to the Indebtedness
shall be referred to as the "Existing Loan Documents."
3. DESCRIPTION OF EXISTING WARRANT TO PURCHASE STOCK AGREEMENT. Versatility,
Inc. and Bank are parties to that certain Warrant to Purchase Stock agreement,
dated April 30, 1998 (the "Warrant Agreement").
4. FORBEARANCE.
A. Bank agrees to continue to forbear from exercising it remedies
available to it as a result of Borrower's default under the Loan
Agreement prior to April 30, 1998 and to forbear from exercising its
remedies available to it as a result of Borrower's existing defaults
of Sections 6.8, 6.9, 6.10, 6.11 and 6.15 under the Loan Agreement,
(the foregoing being referred to as "Existing Defaults") or any future
breaches under the Existing Loan Documents, as modified by this Loan
Modification, Consent and Forbearance Agreement (as so modified, the
"Loan Documents") until the earlier of (a) December 31, 1998 or (b)
the consummation of the merger and related transactions (the "Merger")
as described in that certain Agreement and Plan of Merger, dated
August____, 1998, by and among Acquiror, AQX Acquisition Corporation
and Versatility, Inc. (the "Merger Agreement"). Notwithstanding the
foregoing, the Forbearance Period will terminate upon (a) Borrower's
filing with any bankruptcy court of competent jurisdiction or becoming
the subject of any petition under the Bankruptcy Code, (b) Borrower's
filing or becoming the subject of any petition seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any present or future federal or
state act or law relating to bankruptcy, insolvency, or other relief
for debtors, (c) Borrower's seeking, consenting to, or acquiescing in
the appointment of any trustee, receiver, conservator or liquidation,
(d) Borrower's becoming the subject of any order, judgment or decree
entered by any court of competent jurisdiction approving a petition
filed against Borrower for any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief
under any present or future federal or state act or law relating to
bankruptcy, insolvency, or relief for debtors, or (e) termination of
the Merger Agreement prior to the consummation of the Merger according
to the terms and conditions of Merger Agreement ("Merger Closing").
B. Upon termination of the Forbearance Period, Bank may, at its option,
exercise its rights under the Loan Documents, and under applicable
law; provided, however, that Bank shall notify Acquiror, Acquiror's
counsel, Borrower, and Borrower's counsel (as listed on Exhibit "A")
in writing ten (10) days prior to (a) its acceleration of any amounts
due to Bank, (b) Bank's taking any other action to collect any cash
amounts or realize the benefit of any security interest in Borrower's
assets or (c) the exercise by Bank of any other rights under the Loan
Documents. Bank understands that it is a condition to Acquiror's
obligation to close the Merger that Bank not undertake any of the
actions described in the preceding sentence.
C. As consideration for Bank's agreement to forbear on exercising its
remedies, Borrower hereby renounces and waives all rights that are
waivable under Article 9 of the Code of any jurisdiction in which any
Collateral may now or hereafter be located. Without limiting the
generality of the foregoing, Borrower hereby (a) renounces any right
to receive notice of any disposition by Bank of the Collateral
pursuant to Section 9-504(3) of the Code upon termination of the
Forbearance Period, whether such disposition is by public or private
sale under the Code or otherwise, and (b) waives any rights relating
to compulsory disposition of the Collateral pursuant to Sections 9-504
and 9-505 of the Code.
D. In addition, Borrower hereby agrees that if it shall (a) file with any
bankruptcy court of competent jurisdiction or be the subject of any
petition under the Bankruptcy Code, (b) file or be the subject of any
petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any
present or future federal or state act or law relating to bankruptcy,
insolvency, or other relief for debtors, (c) seek, consent to, or
acquiesce in the appointment of any trustee, receiver, conservator or
liquidation, or (d) be the subject of any order, judgment or decree
entered by any court of competent jurisdiction approving a petition
filed against Borrower for any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief
under any present or future federal or state act or law relating to
bankruptcy, insolvency, or relief for debtors, Bank shall thereupon be
entitled to relief from any automatic stay imposed by Section 362 of
the Bankruptcy Code, or from any other stay or suspension of remedies
imposed in any other manner with respect to the exercise of the rights
and remedies otherwise available to Bank under the Loan Documents.
E. By signing below, Borrower acknowledges that the Indebtedness
currently is in default and as a result of such default and subject to
the terms of this Loan Modification, Consent and Forbearance Agreement
and the April 1998 Loan Modification Agreement, Bank is entitled to
exercise its remedies as provided in the Loan Documents and as
provided under applicable law. Nothing in this agreement in any way
shall constitute Bank's waiver of Borrower's Existing Default under
the Existing Loan Documents except as may have been waived in the
April 1998 Loan Modification Agreement. In addition, Bank's agreement
to continue to forbear from enforcing its remedies under the Existing
Loan Documents until December 31, 1998, notwithstanding Borrower's
Existing Defaults under the Existing Loan Documents, (a) in no way
shall be deemed an agreement by Bank to waive Borrower's compliance
with all other terms of the Existing Loan Documents, as modified by
this Loan Modification, Consent and Forbearance Agreement and the
April 1998 Loan Modification Agreement and (b) shall not limit or
impair Bank's right to demand strict performance of all other terms
and covenants as of any date.
5. CONSENT TO MERGER AND LICENSE.
A. Recitals.
i. Whereas, Borrower has proposed to undergo the Merger, pursuant to
which, among other things, Borrower would be acquired by
Acquiror.
ii. Whereas, Borrower and Acquiror have proposed that Acquiror obtain
a non-exclusive pre-paid license from Borrower (the "License")
prior to the Acquisition, on substantially the terms set forth on
Exhibit B.
iii. Whereas, the Merger and the License are prohibited under the
terms of the Existing Loan Documents.
iv. Whereas, Borrower and Acquiror each requests that Bank consent to
the Merger and the License, and Bank has agreed, subject to the
terms and conditions of this Loan Modification, Consent and
Forbearance Agreement
B. Agreement.
i. Bank hereby consents to the Merger and License. Bank acknowledges
that the License shall survive the termination of the Merger
Agreement and/or the Forbearance Period.
ii. Borrower hereby affirms all present and future obligations under
the Existing Loan Documents, without any defense, offset or
counterclaim of any kind whatsoever. Borrower's affirmation
includes, without limitation, Borrower's grant of a security
interest pursuant to the Security Documents to secure all
obligations of Borrower to Bank.
iii. Acquiror hereby agrees that subject to and promptly following the
Merger Closing, Borrower or the surviving entity will repay in
full all outstanding Indebtedness. Subject to the Merger Closing
and promptly following repayment of the Indebtedness, Bank will
promptly release its security interests in the Collateral.
6. DESCRIPTION OF CHANGE IN TERMS
A. Modification(s) to Loan Agreement.
i. Section 6.16 entitled "Delivery of Requested Funds" is hereby
replaced with the following:
Immediately upon the Borrower's receipt of the Requested Refunds,
the Borrower shall deliver to the Bank the entire amount of the
Requested Refunds that the Borrower received from the Internal
Revenue Service and/or the Commonwealth of Virginia for placement
in a deposit account held at Bank (the "Deposit Account"). As
additional security Borrower grants Bank a first priority
security interest in the Deposit Account and agrees that funds
held in the Deposit Account will be released only according to
the provisions of this section. Upon Bank's receipt from Borrower
of a cash plan detailing Borrower's cash requirements on a
monthly basis (the "Cash Plan"), Bank shall release from the
Deposit Account to Borrower the amount designated in Borrower's
Cash Plan to satisfy Borrower's cash requirements for the ensuing
month (the "Designated Release"). Borrower's Cash Plan shall be
in form and substance acceptable to Bank. The Designated Release
shall occur on the first Business Day of each calendar month and
shall be used for purposes of Borrower's operations during such
month. Bank's obligation to make any Designated Release shall
cease at such time as (a) Borrower deviates from its cash burn
requirements set forth in the Cash Plan by more than 25% or (b)
termination of the Forbearance Period.
B. Modification(s) to Warrant Agreement.
i. During the Forbearance Period, Bank agrees to waive the
anti-dilution provisions contained in Section 2.4 entitled
"Adjustments to Diluting Issuances" and any and all terms and
conditions relating to anti-dilution in Exhibit "A" and Exhibit
"A-1" with respect to any Borrower securities issuances,
including securities used to settle the class action lawsuits
described in Borrower's Annual Report on Form 10-K for the fiscal
year ended April 30, 1998. Effective immediately prior to the
Merger Closing, the Warrant Agreement shall terminate.
7. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
8. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
defenses against the obligations to pay any amounts under the Indebtedness.
9. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Indebtedness, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents.
Except as expressly modified pursuant to this Loan Modification, Consent
and Forbearance Agreement, the terms of the Existing Loan Documents remain
unchanged and in full force and effect. Bank's agreement to modifications
to the existing Indebtedness pursuant to this Loan Modification, Consent
and Forbearance Agreement in no way shall obligate Bank to make any future
modifications to the Indebtedness. Nothing in this Loan Modification,
Consent and Forbearance Agreement shall constitute a satisfaction of the
Indebtedness. It is the intention of Bank and Borrower to retain as liable
parties all makers and endorsers of Existing Loan Documents, unless the
party is expressly released by Bank in writing. No maker, endorser, or
guarantor will be released by virtue of this Loan Modification, Consent and
Forbearance Agreement. The terms of this Paragraph apply not only to this
Loan Modification, Consent and Forbearance Agreement, but also to all
subsequent loan modification agreements.
10. WAIVER AND RELEASE OF CLAIMS.
A. Borrower hereby releases, acquits, and discharges Bank and Bank's
employees, agents, representatives, consultants, attorneys,
fiduciaries, servants, officers, directors, partners, predecessors,
successors and assigns, subsidiary corporations, parent corporations,
and related corporate divisions (all of the foregoing hereinafter
called the "Released Parties"), from all actions and causes of action,
judgments, executions, suits, debts, claims, demands, liabilities,
obligations, damages, and expenses of any and every character, known
or unknown, direct and/or indirect, at law or in equity, of whatsoever
kind or nature, whether heretofore or hereafter arising, for or
because of any matter or things done, omitted or suffered to be done
by any of the Released Parties prior to and including the date of
execution hereof, and in any way directly or indirectly arising out of
or in any way connected to this Loan Modification, Consent and
Forbearance Agreement and the Existing Loan Documents, including, but
not limited to, claims relating to any settlement negotiation (all of
the foregoing hereinafter called the "Released Matters"). Borrower
acknowledges that the agreements in this section are intended to be in
full satisfaction of all or any alleged injuries or damages arising in
connection with the Released Matters.
B. Borrower acknowledges that it has not relied, in executing the release
set forth in this section, upon any representations, warranties, or
conditions by Bank or any other entity except as are specifically set
forth in this Agreement.
C. Nothing contained herein shall be construed at any time as an
admission by Bank of any liability to Borrower or any other entity.
D. Borrower warrants to Bank that it has not purported to transfer,
assign, or otherwise convey any right, title or interest of Borrower
in any Released Matter to any other entity (other than in connection
with the License and Merger), and that the foregoing constitutes a
full and complete release of all Released Matters.
E. Borrower hereby waives all rights which it may have under
Massachusetts law, if any, relating to claims which the Borrower does
not know or suspect to exist in its favor at the time of executing the
release, which if known by it must have materially affected its
settlement. A general release does not extend to claims that the
creditor does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor.
11. INTEGRATION. This Agreement, together with the Existing Loan Documents,
constitutes the entire agreement and understanding among the parties
relating to the subject matter hereof, and supersedes all prior and
contemporaneous proposals, negotiations, agreements, and understandings
relating to the subject matter. In entering into this Agreement, Borrower
acknowledges that it is relying on no statement, representation, warranty,
covenant, or agreement of any kind made by the Bank or any employee or
agent of Bank, except for the agreements of Bank set forth herein. No
modification, rescission, waiver, release, or amendment of any provision of
this Agreement shall be made, except by a written agreement signed by Bank,
Borrower and, with respect to Section 4(B), Section 5, Section 6(B) and
Section 11, Acquiror.
12. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
properties, unconditionally, the non-exclusive jurisdiction of any state or
federal court of competent jurisdiction in the Commonwealth of
Massachusetts in any action, suit, or proceeding of any kind against it
which arises out of or by reason of this Loan Modification, Consent and
Forbearance Agreement; provided, however, that if for any reason Lender
cannot avail itself of the courts of the Commonwealth of Massachusetts,
then venue shall lie in Santa Clara County, California.
13. COUNTERSIGNATURE. This Loan Modification, Consent and Forbearance Agreement
shall become effective only when it shall have been executed by Borrower,
Bank, and Acquiror.
This Loan Modification, Consent and Forbearance Agreement is executed as of the
date first written above.
BORROWER: BANK:
VERSATILITY, INC. SILICON VALLEY BANK
By: _________________________________ By: __________________________
Name:_______________________________ Name:_________________________
Title:________________________________ Title:________________________
VERSATILITY (UK) LTD.
By: _________________________________
Name:_______________________________
Title:________________________________
Acquiror acknowledges and consents to the provisions of this Loan Modification,
Consent and Forbearance Agreement.
ACQUIROR:
ORACLE CORPORATION
By: _________________________________
Name:_______________________________
Title:________________________________